Which of the following statements regarding a taxpayer who receives a lump-sum plan distribution consisting at least partially of employer stock is(are) CORRECT?

1. The net unrealized appreciation (NUA) portion of a lump-sum distribution stock is taxed at ordinary income tax rates when sold.
2. The taxpayer will not be liable for income tax on the net unrealized appreciation (NUA) portion of the distribution until the stock is sold or otherwise disposed of.